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ECONOMY

METI and MOE to discuss decarbonization separately

  • January 27, 2021
  • , Nikkei , p. 5
  • JMH Translation

There is a possibility that the Ministry of Economy, Trade and Industry (METI) and the Ministry of Environment (MOE) will take separate measures on the pricing of carbon emissions. Economic Minister Hiroshi Kajiyama and Environment Minister Shinjiro Koizumi said on Jan. 26 that their respective ministries will launch discussions by separate expert panels. There is a difference between the thinking of METI, which would like to avoid instituting a carbon tax as a carbon pricing measure, and MOE, which acknowledges the carbon tax as a tool.

 

Carbon pricing is a system that puts a price on greenhouse gas emissions and encourages companies to change their behavior through incurring costs. Up until now, the MOE has led discussions on carbon pricing within the Japanese government, establishing an expert panel in 2018 and putting together a midterm report in 2019. At the time, the industrial sector showed resistance to increased costs and the deliberations did not proceed further.

 

The situation changed with the launch of the Suga administration in the fall of 2020. Prime Minister Yoshihide Suga announced the plan to reduce greenhouse gas emissions to zero by 2050, and instructed both Kajiyama and Koizumi to hold concrete discussions. The Green Growth Strategy, which was formulated mainly by METI at the end of 2020, includes a statement on discussions of carbon pricing. Kajiyama announced on Jan. 26 that METI will convene a study group in mid-February to start discussions. Kajiyama said the group will discuss the issue widely, including talks on the “carbon tax, carbon emissions trading, and border adjustments.”

 

The MOE has already announced its policy to resume discussions by its expert panel, which will convene a meeting on Feb. 1. The panel will discuss the situation of carbon pricing as well as the carbon tax and carbon emissions trading. METI is in a position to follow MOE’s lead. Both ministries intend to have their officers attend each other’s meetings, but there is a possibility that each meeting will reach slightly different conclusions.

 

This is because METI is cautious about the introduction of a carbon tax. In a past interview with Nikkei, Kajiyama noted that Japan “already has a tax for global warming, and we need to think about whether an additional cost will be a positive or negative addition to the zero carbon emissions plan.” A top METI official says that “the industrial sector will not accept the idea that a heavy tax will prompt companies to change.”

 

METI will emphasize the use of carbon emissions trading. An upper limit will be placed on companies’ greenhouse gas emissions. Permits for emissions can be bought and sold on the market. Companies that exceed their limits will be fined. This system will allow the value of companies’ emission reduction efforts to become visible, with market trading used effectively to reach the overall reduction goal. There are many examples of carbon emissions trading systems: the European Union (EU), Tokyo, and Saitama have introduced their own systems.

 

On the other hand, the MOE is mulling a carbon tax. There are difficulties with setting a cap on emissions. A carbon tax would be simple because the tax would be levied on the amount of greenhouse gas emissions. It would be necessary to make adjustments with the existing taxes on fossil fuels. Nevertheless, many people in the MOE support a carbon tax because it would encourage companies to invest in decarbonization.

 

The carbon tax and emissions trading in Europe are thought to have encouraged companies to invest in improving the environment and support both decarbonization and economic growth. Both METI and MOE will come to a conclusion on this issue by the end of the year. If the ministries pursue different ideas, it will be impossible to implement effective measures.

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